Defined by silence

Despite the fact that these days, so much is being said, shown, and written about Ukraine and the war that Russia waged on her; despite all the news, numerous interviews and videos of President Zelensky speaking to whoever is willing to listen; despite constant buzz in the Ukrainian segments of social media where people coordinate humanitarian help, support to the territorial defense units, the relocation of people, and million other urgent matters; despite all these the inner condition, the state of being of the country is probably best defined by the word ‘silence.’ 

Silence can stem from different circumstances and possess various qualities. It can be voluntary or forced, deafening or revealing, powerful or paralyzing. What unites all these is absence as an antonym to presence; the absence of something that could have been but is not. This silence in Ukraine in the middle of murderous noise is the absence of the words, expressions, thoughts, actions, intentions that could have been said, stated, done, shown, uttered if there was no war.

Silence also does not necessarily mean the absence of people, quite the contrary – the more people whose voices have been silenced, the more deafening and horrible it grows. This is especially true when talking about culture: Ukrainian culture today is a void compiled of empty spaces that could have been filled with books, exhibitions, performances that did not happen –  and most probably, will not happen for a long time.

Kinder Album: Ukrainian Titans Holding Up the Sky. 2022, published on Instagram. Image courtesy of the artist Kinder Album.

Back in 2014, at the de facto onset of the current invasion – occupation of Crimea and the war in Eastern Ukraine, –  the outstanding Ukrainian writer Oksana Zabuzhko switched from her writing  to producing endless interviews and articles, predominantly for western media. She called it ‘getting into a tank’ – an expression which later became a title for her collection of essays and interviews.

Yet again, everything was brought to a halt on 24 February this year, but on much larger and more terrifying scale. 

This time another outstanding Ukrainian writer, Sofia Andruchovych wrote: ‘Before the war, I was a writer. Today, on the ninth day, I feel unable to string two words together’. 

Film director Marina Stepanska stated on her Facebook in A Letter from Ukraine: ‘I used to be a filmmaker, now I’m not.’

Meanwhile, artist Lesya Khomenko left everything in her studio in Kyiv and took to Ivano-Frankivsk in Western Ukraine with her daughter, and started a lab for displaced artists. She calls it ‘a therapeutic space’ to look at the current situation and try to deal with it through collaborative work. She says, ‘We left all our works behind, we are left with nothing, without a biography. When some might have their works digitalized, others like myself have only material pieces.’

So, what are the voices of the silence? What happens to art (and artists) during the war? The question is twofold. One problem is what happens instead of art that did not happen. The other: what happens to art that already happened.

The art that already happened

A few days after the war started, globalmedia picked up the story of Maria Prymachenko’s works being destroyed as a local history museum burned down after missile hit in Ivankiv, near Kyiv. The story went viral spreading from arts magazines and newspapers to mainstream media: colorful phantasmagoric images of Prymachenko’s imagined flora and fauna covering printed pages and newsletters. 

Shortly after, thenews surfaced that some of the paintings may have been saved by locals – maybe even more than those destroyed. It is worth noting that the main collection of her works was stored elsewhere in the first place. Yet, this information never made it to the top headlines, and neither did the news about the destroyed or severely damaged museums in Kharkiv, Mariupol, or Chernihiv. 

A powerful visionary painting by Maria Primachenko: May That Nuclear War Be Cursed! 1978. Fair Use via Wikiart.

Was this information simply swallowed by the tsunami of other news? Lost among the daily reports of children being killed, civilians kept hostage, whole cities destroyed? Maybe people simply more important than artworks, allowing the threat to lives overshadowing the problem of cultural heritage? It may have been affected by  the authorities’ reinforced demand not to publish any visuals and not to disclose the locations of the missile hits and destruction? 

Or was this silence already internalized and accepted? Did museum workers and cultural professionals remain silent because they understood that any information about the collections, their whereabouts, their conditions or further prospects equaled putting a target on them?

On the other hand, the uproar about the destruction of Prymachenko’s works might have concentrated on something other than the artist, or even the works. It might have been another omission created by the war, a tangible example of loss when  destruction was the only story to tell. 

In war, the materiality of destruction prevails over the materiality of existence. The physical pressure and the finite mass of the rubble left after the missile hits a building feels like the end of the sentence. All said. Period. Nothing can be done. Time to move on. 

But those who survive, be they people or objects, need their stories and histories. Without them, Prymachenko stays a ‘folk’ artist whose works appeared on postal stamps, was awarded an art prize (notably, both these happened still under the Soviet Union), and was praised by Picasso.  These little scraps of info were mentioned all over international media. 

In this context, her unique story as an autodidact who never left her village, her cosmovisions of interconnectedness of life that blurred the borders between the reality and dreams, the role of her works for the generations of Ukrainian artists and in forging Ukrainian cultural identity have no place and no attention. In the place where a story should be told, there is silence.

Even more silence occupied places of stories that could have been told. Museum collections are stored in basements in undisclosed locations,: and museum directors refuse to talk about the specifics; activists raise funds and collect basic necessities to support the people who save the artworks. Grassroots initiatives like the Museum Crisis Center provide packaging material and fire extinguishers, prioritizing museums in small towns and villages. These objects of varying value, origin, and provenance,are parts of a cultural heritage that would need to be exhibited, contextualized and analyzed, woven into the complex history of a country whose people were deprived of history for a long time. But right now, security prevails over the need of storytelling.

And then there are the artworks of living artists too, left in studios and galleries basements, sometimes rescued by volunteers or fellow artists, sometimes already lost forever.

The art that did not happen

If some of these works are never to be recovered, what does it make them? Will they be merely a ‘lost biography’, in Lesya Khomenko’s words? Are they an already lost heritage? And what’s the difference? When and if the images, the digital copies of these works are to be exhibited sometime in the future, how will the present, material objects created by the same artists during the war look next to them? Perhaps, there will be a note, a small caption next to each of them saying something like ‘This work was not the one planned by the artist or created out of her/his good will. It was created by the war.’ 

Alevtina Kakhidze is one of the artists to document her experiences since the second day of the war, utilizing her vast international recognition and  network all over Europe and in Russia. In her first war drawings – the first pages in her ongoing visual diary published on her Facebook page –, Alevtina tried to call on Russian artists and intellectuals to take to the streets. 

Over the next days and weeks, she and her husband in their house in the suburbs of Kyiv with their dogs, enduring shelling and the threat of the possible invasion, her drawings transformed into imprints of her daily experiences. Starting from sleeping in the basement without electricity or internet connection, spanning all the way into visual discussions about the origin of Russian imperialism and the need to decolonize Russian culture. 

Alevtina Kakhidze, Cancel Russian culture. 2022, published on Facebook. Image courtesy of the artist Alevtina Kakhidze.

Alevtina, who is also a performance artist, picked up her peculiar visual language of fast drawing, small on-the-go sketches in a previous series of works where she criticized consumer society. But her world changed in 2014 when war became a huge part of her realilty because her mother, as so many other people of age, refused to leave their homes on the occupied territories in Eastern Ukraine. 

Phone calls between mother and the daughter, sketches of the mother’s life under the occupation, and other aspects of the war’s political reality built up an extensive visual diary; 2D performances where colorful schematic figures were surrounded by words in different languages – Russian, Ukrainian, English. 

Alevtina Kakhidze, Birthday. 2022, published on Facebook, available via Artists for Ukraine. Image courtesy of the artist Alevtina Kakhidze.

These drawings from 2014 on are not sketches for something else, not preparation for the bigger work, as artists’ diaries and sketchbooks often are. They are snapshots of the moment, visual notes, messages mainly to oneself (and then, to others) not to forget, not to let go even if sometimes that’s exactly what one yearns to do..

Maidan, the occupation of Crimea, and the war in Donbas have changed not just the visual language, but the way artists perceive themselves. As many said during, and especially right after Maidan: when the unthinkable and unimaginable was happening, artists turned into regular citizens, activists, human beings doing whatever they could to help the situation. Even more important, however, was that the inner permission ‘to not be an artist’: allowed not to imagine or reflect, let alone represent, but instead collect, record, save, and try to keep reality intact. 

Already then, eight years before the full-scale invasion and war unfolded, artists were collecting the evidence of atrocities. The struggle for a visual language to grasp and speak about the reality was an attempt to (re)claim agency and to own the narrative, to dare and see the war and its aftermath with their own understanding, not through the imagery supplied by mass-media or commercial culture, and avoiding the recycling art of other wars or conflicts. The aim has been to build a unique form of expression, one that transcends mere tropes; one that is true to the reality of the here and now.

Peripheral vision

Writing about the frames of war, Judith Butler inquired about how the framing of the image of war through cameras affects the materiality of war and influences public discourse about it. She extensively analyzed how the frame of an image includes and excludes certain parts of a narrative, forming resistance potential on the margins; in those zones of exclusion something is undisclosed and the numbers of casualties are not self-explanatory (1). However, Butler writes about the politics of framing the materiality of war for the external gaze. But what happens on the inside, when the perception is framed by someone’s own eyes? What will fall on a blind spot, what is oushed to the periphery?

For those living the daily reality of this current war, the materiality and violence are framed by the Ukrainan government’s explicit ban on the use of the immediate images of destruction – this ban was introduced for security reasons, however, there is an increasing number of cases of international media and Telegram channels violating this ban. 

This experience is complemented by the unspoken expectation of international media to limit the expression of strong emotions. It somehow seems that being openly emotional, like expressing pain or rage, deprives the speaker, regardless of her or his recent experience, of the assumptions of rationality, dignity, and thus of agency and a valid voice.

It is on the margins of this frame that artists often step in.

‘My husband, artist and musician @maxrobotov is a lieutenant in the Ukrainian army now. He sent me his photo because I was curious what it looked like. Taking photos of soldiers and military objects is forbidden now in Ukraine because of the war. Before the escalation of the war, I was contemplating the commonalitiesof the military optic and artistic view. Max represents both positions now,’ wrote Lesya Khomenko on her Facebook page in mid-March. Below is her painting of the photo of her husband, bareheaded, in half-military half-civilian clothes, giving military salute. It’s her first work after February 24 and after relocation to Western Ukraine. Somewhere behind the surface of this clearly distanced, even formal painting and behind the artist’s calm words is fear, suffocating fear never to be able to see your loved one again.

Lesya Khomenko’s portrait of her husband, based on a photo, 2022. Image courtesy of the artist Lesya Khomenko.

Kateryna Lysovenko spent a few nights in a bomb shelter in Kyiv with her two children and a cat before relocating first to Lviv, then to Poland, and soon to Austria. Lysovenko created a number of smaller watercolours while on the road. Schematic, flat, almost faceless figures stand against the grim background, almost dissolving in it. One of the works says ‘Propaganda of the living world. Stop murder.’

Kateryna Lysovenko, Propaganda of the living world. Stop murder. 2022. Image courtesy of the artist Kateryna Lysovenko.

The living world, human and non-human relations, care for the world but also the care of a mother for her child had been Kateryna’s topics well before the war. Arriving in Poland, lost and disoriented, her children deeply traumatized, she got a residency support from BWA Zielona Góra.  There she goes back to large-scale painting: human figures get more shape and sometimes even faces, they are mostly female, carrying or holding, sometimes cradling children. She’s almost back to her usual imagery with a few striking exceptions, however: on most works, the colors are gone or faded, and once in a while, maybe on especially emotionally hard days, the strong corporeality of bodies shrinks again to small, shapeless figures, piled up in a mass graves or spread on the ground, raped, bleeding. 

Kateryna Lyvosenko, They Can Repeat. 2022, published on Instagram. Image courtesy of the artist Kateryna Lysovenko.

Accompanying the images of her works on her Instagram, another diary of the war, the artist writes, ‘I carry gardens of sorrow, gardens of anger from irreparable loss, I remember everything that disappears, I want to breathe deeper to accommodate more, I am now a moving cemetery.’

Kateryna Lysovenko, Gardens of Sorrow. 2022, published on Instagram. Image courtesy of the artist Kateryna Lysovenko.

Bodies, shapeless ones looking more like outlines or abstract figurines or more definitively feminine, are one of the main symbols in the imagery of this war. Shapeless ones usually come en masse – in bomb shelters or train stations. Female ones, naked and apparently vulnerable, protect, embrace, or stop the tanks, like in the works of the female artist who works under the alias Kinder Album; iothers grow into and with the nature, turning into birds, animals or vegetation, like in works by Sana Shakhmuradova.

Sana Shakhmuradova: Dedicated to victims (women, children, civilians) raped, tortured, suffered and died because of Russian inhumane attack and violence. 2022, published on Instagram. Image courtesy of the artist Sana Shakamuradova.

The imagery and symbolism of these and many other artists’ diaries are very simple and schematic, lines are fast, colors are rough, emotions are raw. Even if already exhibited somewhere in exile, these works are still mostly meant as notes to oneself, semi-public diaries available on social media, a regular exercise in seeing and feeling without a chance to escape. 

They remind of what is seen should never become unseen and what’s been understood can never be dismissed. The overwhelming reality of this war needs to find its way onto the physical surface of paper, canvas, or wall, to stop it from being forgotten.

Kinder Album, Russian Soldiers Rape Women in Ukrainian Cities. 2022, published on Instagram. Image courtesy of the artist Kinder Album.

As for male artists and the male imagery of the war, the silence is even more literal. Many notable artists as well as writers, actors, film directors, researchers, and other intellectuals, voluntarily enlisted either into the army or into the territory defense units. The works they could have drawn, painted, written, filmed, is now covered in the throbbing silence of the war.

Testimonial

International discussions about the role and function of art in the war are tailored to notions like ‘healing’ and ‘peaceful mutual understanding.’Neither of these are expressed in the current works of Ukrainian. 

It is testimony, it is the evidence of the tragedy that should have never happened, but indeed it has. It’s a powerful emancipatory work to create a visual language that can grasp these events, the loss, the emotions; to record this particular present in a new, uncomfortable yet distinct voice.

After the first major wave of the pandemic, Cameroonian philosopher Achille Mbembe wrote, ‘fundamental vulnerability is the very essence of humanity (2).’ 

Art conceived as a daily practice of seeing and enduring is an evidence to this fundamental vulnerability.

(1) Judith Butler Frames of War. When Is Life Grievable? (London: Verso, 2010)

(2) Mbembe, Achille. ‘The Weight of Life. On the Economy of Human Lives.’ Eurozine. https://www.eurozine.com/the-weight-of-life/. Publication date: 06.07.2020.

The Great Green Investment Investigation

Explore The Great Green Investment Investigation via this link, and read a translated version of “Half of Europe’s ‘Dark Green’ funds invest in the fossil fuel industry or in aviation“, one of the signature publications of the project here below.

Half of Europe’s ‘Dark Green’ funds invest in the fossil fuel industry or in aviation

It seemed like an ordinary Tuesday in Frankfurt, the financial heart of Europe. Hundreds of bankers were busy working in Deutsche Bank’s two giant skyscrapers. Across the street at DWS, the asset management division of Deutsche Bank, employees had unsuspectingly started their day as well.

But then, midway through that morning in May 2022, some fifty police officers raided the offices of Deutsche Bank and DWS. Employees were questioned, files were confiscated, and data was retrieved from computer systems. The allegation: greenwashing. DWS allegedly portrayed its financial products as much greener than they really were.

Sustainable investing was once a niche. Ethical investors played a modest role in the abolition of slavery: they refused to make money from industries that employed slave labour. A small group of European and US investors turned their backs on Shell late last century because the Dutch-British company was active in apartheid-torn South Africa.

Then impact funds were created, focussing on investments with a positive social impact instead of excluding companies. For instance, the Dutch sustainable bank Triodos started a fund in the 1990s to finance farmland, favouring organic farming. Its volume: 25 million guilders (converted: 11.3 million euros). ‘It was still tiny,’ recalls Marilou van Golstein Brouwers. She was the Managing Director of Triodos Investment Management and had a hand in creating the fund. ‘People, including the government, were positively surprised that private individuals were willing to invest in a public cause.’

Nowadays, sustainable investing is no longer ‘tiny’, that is: if we are to believe the financial sector. Since the turn of the century, there has been a steady growth in the number of investment funds that claim to invest their clients’ money sustainably. It started slowly: in 2010, only 3 per cent of European investment funds labelled themselves as sustainable.

The breakthrough came in 2015. That year, the Paris Climate Agreement was concluded, the United Nations set the Sustainable Development Goals (SDGs), and Pope Francis called upon humanity in the encyclical Laudate Si to be frugal with the Creation. Investors responded. They are no longer merely concerned with financial returns: more and more, they want to help create a better world through their investments.

The financial industry answered that call. In Europe, roughly 100 new funds labelling themselves as sustainable were set up that year; currently, around 100 are added every quarter. According to financial services provider Morningstar, 50 per cent of all the money in European investment funds is presently labelled as ‘sustainable’. This amounts to over 4.18 trillion euros, an amount comparable to the market capitalisation of Alphabet, ASML, Coca-Cola, Nestlé, Pfizer, Samsung, Shell, Toyota, Walt Disney, and Walmart combined.

That’s a lot of money. But where does it actually end up? Do the investment funds that promise sustainability – and to which millions of Europeans entrust trillions of euros – deliver on their promise?

The Great Green Investment Investigation was set up to address those questions. This is a pan-European investigative journalism collective, founded by Dutch platforms Follow the Money and Investico, which includes Handelsblatt (Germany), Le Monde (France), El País (Spain), IRPI (Italy), De Tijd (Belgium), Børsen (Denmark), Der Standard (Austria), Luxemburger Wort and Luxembourg Times (Luxembourg). With 26 journalists from nine different European countries, we investigated where exactly the money of European investors seeking sustainable investments ends up.

Trump boosts your sustainability score

A major stumbling block is that ‘sustainability’ has no fixed, legally-defined definition, so one can easily apply the term to almost anything. For many investment funds, it merely means that the so-called ESG criteria (ESG stands for Environmental, Social and Governance) played a role in the decision to invest in a specific company.

This can be interpreted broadly: many funds that claim to be sustainable do not really focus on a company’s environmental, social, or governance contribution to the world; instead, they focus on how changes in environmental, social or governance conditions could affect that company.

Tariq Fancy, former head of the sustainable investment division of BlackRock, the world’s largest asset management fund, explains this as follows: ‘Suppose Trump returns to power. Many companies’ ESG ratings will then go up, because the likelihood of those companies facing new social or environmental laws in America will decrease.] As such, ESG doesn’t really measure a company’s effect on the world, but rather how the world affects a company. Fancy: ‘It’s about value, not values.’

So the 4.18 trillion euros in European investment funds that supposedly flow into sustainable investments is, in reality, a collection of money pots that each use a different interpretation of sustainability. At one end of the spectrum, sustainable investing means that the fund ‘considers’ ESG scores when deciding to invest in something. Social impact is not a goal, and social harm is no reason to exclude a company; it merely looks at how a world becoming more sustainable might affect a company’s returns.

At the other end of the spectrum we find the impact funds, where financial returns play no, or a lesser, role and success is measured by the social improvement achieved through an investment. Among them are funds that invest in organic farming, nature reserves or education for girls: not because it makes money, but because it makes the world a better place. They define sustainability in a completely different way.

Grey, light green, dark green

The European Union has been trying to clarify the muddled interpretations for several years. In 2018, it developed the Sustainable Finance Action Plan, a strategy to shift money flows from companies contributing to global warming to sustainable initiatives. By now, this plan has become part of the Green Deal, the programme through which Europe aims to become the world’s first climate-neutral continent.

The Sustainable Finance Disclosure Regulation (SFDR) is a key part of that plan. Under those new rules, which have officially been in force since March 2021, fund managers are obligated to provide a sustainability assessment of their fund. They can choose between three flavours: grey, light green and dark green. Grey funds (officially: Article 6 and Article 7 funds) are merely required to provide an analysis of the sustainability risks they face. Light green funds (officially: Article 8 funds) must pursue sustainable goals and must explain how they do so.

Lastly, Article 9 funds. The market promotes this category as the most sustainable form of investing. Companies including BNP Paribas, Deutsche Bank, ABN Amro, Unicredit, Deloitte, Robeco and ING Bank label these funds as ‘Dark Green’.

This category has the highest sustainability requirements. Funds claiming Article 9 status must pursue an explicit social or environmental goal, for instance preventing human rights violations or environmental pollution. Moreover, they may not inflict ‘significant harm’ to other sustainable goals in any way. Even if an Article 9 fund only aims to prevent human rights violations, its investments may not significantly harm the climate or nature.

A fund that claims the Article 9 classification clearly benefits commercially. While equity markets went down in recent months due to inflationary pressure, geopolitics and impending recession, green funds managed to raise more money in Europe. According to the European Fund and Asset Management Association (EFAMA), Article 6 and Article 8 funds lost tens of billions since the beginning of this year, whereas the capital in Article 9 funds grew by 31 billion euros. In other words, the Article 9 flag attracts clients.

Thousands of investments in the aviation and fossil fuel industry

This is why The Great Green Investment Investigation focuses on these Article 9 funds to find out what happens to the money of European investors with a sustainable conscience. After all, these funds have to meet the most stringent requirements and should be greener than green.

First, we listed all European funds that classified themselves as Article 9. There are 1141 of them (reference date: June 30, 2022). We then tried to find their complete portfolio and succeeded for 838 funds, three-quarters of the total. Their portfolios collectively contained 130 thousand investments worth over 619 billion euros.

We measured these investments against a sustainability yardstick and kept the threshold for being earmarked as a ‘sustainable investment’ low. While the European rules for sustainable investments uses a broad definition of sustainability – from social sustainability, such as respect for human rights and good employment practices, to environmental sustainability, such as preventing harm to nature and water quality – we only looked at climate damage inflicted by the companies in Europe’s Darkest Green funds. (For more information on our research methodology, click here).

Yet many funds already failed to meet this low bar. In almost half of the Dark Green funds, we found investments in the aviation or fossil fuel industry. For example, a BlackRock Article 9 fund has over a billion euros worth of investments in energy companies such as RWE (that derived approx. 65 per cent of its energy from lignite, coal and natural gas in 2020), ENEL (43 per cent) and Nextera (75 per cent).

A Dark Green investment fund from French asset manager Carmignac, which writes in official documents that it ‘thematically invests in companies that mitigate climate change’, appears to invest in, among others, petroleum supermajor TotalEnergies and in Glencore, a fossil fuel conglomerate with large stakes in Russian oil company Rosneft and coal producer Xstrata.

Money from all over Europe flows from Dark Green funds to investments in grey companies. In Luxembourg, we found grey investments in 43 per cent of the Article 9 funds, percentage-wise the least. In Italy, we found grey companies in over 49 per cent of the Article 9 funds. Green money flows to investments in supermajors (including Shell, Total, BP and Saudi Aramco), airline companies (including Lufthansa, Delta and Air France-KLM) and coal giants (such as RWE, Glencore and Uniper).

We found well over 8.6 billion euros worth of grey investments in Europe’s Dark Green funds. That does not mean that the remainder are explicitly green. The most popular investments are Microsoft (8.2 billion euros), pharmaceutical company Novo Nordisk (7.6 billion), Apple (6.7 billion), Alphabet (4.4 billion) and pharmaceutical company Thermo Fisher (4.1 billion). McDonald’s, Coca-Cola, Pepsico, L’Oréal, and Louis Vuitton Moët Hennessy also rank high on the list.

European investors pay a fee for the composition of their ‘sustainable’ fund. A recent experiment by Paul Smeets, professor of Sustainable Finance at the University of Amsterdam, suggests that the financial sector charges higher fees for sustainable funds. Smeets calls this a greenium, a green premium. This markup ranges from 7.7 to 8.3 basis points. Over the total capital of 619 billion euros invested in Dark Green European funds, that amounts to an additional annual premium in the range of 480 to 510 million euros.

‘And that while sustainable fund managers put the same or even less effort into composing these funds,’ Smeets explains. ‘Besides sustainability factors, they didn’t look at other financial data, for example. And now that your investigation reveals that sustainable funds are also investing in oil and gas companies, investors may be facing double the risk: they pay more for a sustainable fund and invest in something that in reality is not green at all.’

‘In violation’

European-VEB, the advocacy group for European securities owners, is outraged by the investigation results. ‘It is absolutely reprehensible. You simply cannot use a Dark Green label to raise billions of euros without being truly sustainable. That label is not a marketing tool, it is a promise to investors.’

Julien Lefournier, former employee of the bank Crédit Agricole and author of L’illusion de la finance verte (The Green Finance illusion) calls this ‘strong observations’, which prove that ‘the rhetoric of Artikel 9 funds [is] often hollow’. ‘They go out of their way to make people believe that they are transitioning, but invest in old-fashioned fossil companies.’ Reclaim Finance, a French NGO aiming to make capital markets more sustainable, calls these investments ‘not in line with protecting nature and the climate’. Its German counterpart Urgewald states: ‘Article 9 funds claiming to support a “climate transition” but actually still invested in expanding fossil fuel companies are denying climate science and acting highly irresponsibly.’

Experts argue that the aviation and fossil fuel industry investments found in Article 9 funds do not comply with European investment rules. ‘I don’t see how investing in fossil energy cannot cause significant environmental harm,’ says ESG expert Ruud Winter. Sjors Vogelsang, a lawyer advising on financial regulatory law, is adamant: ‘A fund manager who labels a fund as “Article 9” while it partly invests in fossil fuel companies is in violation.’

‘May I invest in an oil company, yes or no?’

However, the asset managers putting grey investments into green funds believe they are not doing anything wrong. They say it is down to the rules, which would still not make it sufficiently clear that fossil fuel investments do not belong in a sustainable fund.

Amundi, one of France’s largest asset management companies, argues ‘that the current regulatory framework does not yet allow for a uniform response from the financial industry as to what should be considered “sustainable” or not’. Axa, which offers its funds throughout Europe: ‘The notion of “sustainable investment” remains subject to various interpretations, as the definition given so far by the European regulator [..] is not very precise.’ The Spanish industry association for investment funds INVERCO says they ‘were astonished to see that one of the questions [for the European regulator] was the definition of sustainable investment, more than a year after that the regulation was published’. Dutch Actiam also believes it is not in violation of European regulations, which the asset manager incidentally calls ‘crap’. ‘I want clarification. May I invest in an oil company, yes or no?’

However, according to the European regulator, the European Securities and Markets Authority (ESMA), it is not all that complicated. Last summer, ESMA once again clearly explained the rules: ‘Financial products that have sustainable investment as an objective should only make sustainable investments.’

Still, ESMA will not take action against asset management companies that sell grey investments as Dark Green. While the rules are clear, according to ESMA, it is not responsible for their enforcement. That task lies with national regulators, who seem to be struggling with it.

On the one hand, they find grey investments in a sustainable fund remarkable: ‘It’s very difficult to reconcile fossil fuel companies with investment funds that have a sustainable objective,’ says Raoul Köhler, Sustainable Finance Coordinator at the Dutch Authority for the Financial Markets (AFM). ‘To me, it seems obvious that shares in highly polluting companies do not belong in such a fund. That will be a big problem.’ Spanish regulator CNMV argues that fossil fuel companies are allowed in an Article 9 fund ‘under very specific circumstances’ only. ‘And even then, they may not inflict any significant harm.’

Yet national regulators argue that the law doesn’t provide them with sufficient guidelines for enforcement. ‘The text is just not specific enough,’ says the French AFM. According to Luxembourg’s regulator, the question arises as to what exactly is meant by greenwashing. ‘The problem with greenwashing is its complexity and unfortunately there is no uniform definition on a European level at present.’ The Dutch AFM says it has asked ESMA to ‘clarify what constitutes a sustainable investment, and what constitutes “significant harm”’. We therefore understand why asset management companies are not doing everything correctly yet.’

ESMA doesn’t understand where the ambiguity comes from. Speaking to The Great Green Investment Investigation, the regulator says: ‘While there is not an explicit ban on fossil fuel investments as “sustainable investments”, it should be quite challenging to make such investments under sustainable investments due to the need to show that the investments do not harm any environmental or social objective. [..] it should indeed be quite difficult to argue that fossil fuel investments would respect DNSH.’

Taking action is possible

The raid on DWS proves that it is indeed possible to take action against greenwashing in the financial sector. German authorities took action after discovering that the asset manager recorded in its annual report that ESG factors had been applied in more than half of its total invested assets – 451 billion euros – to make the portfolio sustainable. This turned out to be untrue, resulting in DWS finding the police on its doorstep.

In America, investment bank BNY Mellon was fined one and a half million dollars in spring this year for failing to conduct sustainability checks on investments it promoted as sustainable. Last month, investment bank Goldman Sachs received a 4 million dollar fine after it transpired that ESG analyses had been carried out after the decision to invest in a company had already been made, meaning that sustainability was an afterthought instead of a selection criterion.

Even with grey investments in Europe’s Dark Green funds, national authorities can simply take action if they want to. This is according to Myriam Vander Stichele, who was part of an expert group that laid the foundation for European legislation and regulations on sustainable investing on behalf of the European Commission. One of her priorities was to empower regulators to take action. ‘Funds with a clear sustainable objective should not be allowed to invest in shares of fossil fuel companies. They can then not deliver on their sustainability promise. The regulator has the mandate to fine misleading funds.’

She therefore fails to understand why there is no enforcement. ‘If the AFM does not take action or does so too late, it poses a huge risk. The credibility of sustainable investing is at stake.’ Danish consumer organisation Forbrugerrådet Tænk says: ‘This destroys the confidence in green investment funds, and if that happens, we risk losing the billions for a renewable transition. That will hurt us all.’ European-VEB fears irreparable damage: ‘The biggest cynic of all is the disappointed idealist. We run the risk that a large group of investors who factor sustainability into their fund choice will be disappointed and lose faith in maintaining a sustainable economy.’

Since the beginning of this year, several European asset management companies have downgraded their Article 9 funds to Article 8. But in the meantime, numerous new Article 9 funds have been added that, in the end, increase the number of funds proclaiming to be ‘Dark Green’.

Translation by Delia Burggraaf